India’s economy going downhill and Modi’s rhetoric won’t help it save itself

The Indian economy is in a gloomy situation right now. It’s not just the COVID-19 pandemic or the resultant lockdown announced by Prime Minister Narendra Modi’s regime that worsened the situation, rather, it’s the global economic crisis of capitalism––ongoing since the 2008 US Subprime Crisis––that has pushed the Indian economy into an abysmal crisis, like the one the world is going through.

Economists are divided on the issue of the economic revival of capitalism in the post-COVID stage. Even when the custodians of capitalism like big financial corporations, organisations like the International Monetary Fund (IMF) and consultancy firms like McKinsey are predicting a contraction of the Indian economy, Modi and his sycophants are trying to show India as an emerging economic superpower using mere rhetoric.

A sudden surge in the profits of a few corporations, amid an utmost gloomy situation, is sparking the flames of hope for the Modi regime. Addressing the European Union earlier and, later, while luring the US-based big business houses to invest in India, Modi emphasised on Indian economy’s dynamism that he claimed will make it reverse the tides. This unfounded optimism is received highly by his diehard fans and crony-comprador capitalists who donate liberally to fund his halo of invincibility. However, it’s sans logic or empirical evidence, things that this regime never cared about.

The leading global investment bank NOMURA has pegged India’s GDP growth for the financial year (FY) 2020-21 at -6.1%. The contraction is estimated on the basis of the stringent lockdown that the Modi regime imposed from March 25th onwards to purportedly curb the COVID-19 pandemic, which gave a severe blow to the economy and caused a large-scale internal displacement due to reverse migration of unorganised labour to the rural areas from cities. NOMURA estimates show that the repercussion of the lockdown and the COVID-19 pandemic will gradually slowdown from the third quarter (Q3) of FY 2020-21.

Though the Modi regime is reluctant to accept that the lockdown failed to meet its stated objectives and that the economy was in a state of coma in the pre-COVID-period and the pandemic actually uncovered the messy situation, the IMF’s findings show that the Indian economy will contract by 4.5%. In the Q3 of FY 2019-20, India’s GDP growth fell to 4.7%, even when a new computation method has been in use since the last few years as Modi tried to inflate GDP score of his reign vis-à-vis the Congress party-ruled years.

McKinsey projected three outcomes regarding the Indian economy in April 2020 depending upon the lockdown duration. As India’s lockdown was partially lifted from mid-May onwards and it drags on in many parts of the country even now, both projections of “Scenario 2” and “Scenario 3” can be considered as its observation, which puts the GDP contraction anything between -10% at the lowest to -2% at the highest. It’s unlikely that the Modi regime will take these estimations seriously as well. Therefore, the nonchalant attitude of the Modi regime, its sole focus on liberalising the economy, selling public assets to the big corporations and its zeal to sell-off Indian farm and food security to global giants and their Indian crony-comprador allies, will keep destroying the lives and livelihood of millions.

The Modi regime is exhibiting sheer nonchalant attitude to the people regarding the economy because amid this gloomy situation, there are big corporate houses who are making a kill. Using Reliance’s 5G technology-based JIO Platforms as a vessel of prosperity, Mukesh Ambani, the chairman of the Reliance Industry Ltd (RIL), became the sixth richest man in the world. There are many other corporate houses that are making a kill in this situation.

Hindustan Unilever Limited (HUL)––an Indian subsidiary of Unilever––posted a  net profit of Rs 18.81 billion for FY 2020-21, which is a 7% increase vis-à-vis Q1 of FY 2019-20, when it earned Rs 17.55 billion. The total revenue of HUL in Q1 of FY 2020-21 is Rs 107.16 billion. Britannia posted a 118.25% year-on-year (YoY) rise in net profit at Rs 5.43 billion. The Q1 net profit of Britannia in FY 2019-20 was Rs 2.49 billion. Britannia’s revenue increased by 26.67% YoY to Rs 34.21 billion in Q1 of FY 2020-21.

While one can credit the high demand for the consumer goods and biscuits––India’s most popular snack and glucose source––during the lockdown and after it was lifted, as the reason for the soaring profits of HUL or Britannia, who have been cashing on the crisis, other companies, not linked with consumer goods, also made a kill during the Q1 of FY 2020-21.

ICICI Securities posted a 70% jump in profit after tax (PAT) to Rs 1.93 billion in Q1 of FY 2020-21. ICICI Prudential Life Insurance posted a marginal 0.9% rise in profit due to a fall in premium income. HDFC Life posted a 6% increase in net profit in Q1 FY 2020-21 at Rs 4.51 billion, despite facing a 10% fall in premium income. SBI Life’s net profit also rose by 5% in Q1 to Rs 3.90 billion. Similarly, Federal Bank’s net profit rose 4.3% to Rs 4 billion in the same period. The rise in concern about financial security drove insurance sales but lack of income caused a fall in the premium collection from existing customers.

Information technology major Infosys posted an 11.4% growth in its consolidated net profit in Q1 of FY 2020-21 at Rs 42.33 billion. Another major technology firm HCL Technologies posted a 31.7% YoY growth in net profit at Rs 29.25 billion in Q1 FY 2020-21. Den Networks, the leading cable and broadband service provider, also posted a four-fold jump in its net profit during the Q1 of FY 2020-21 at Rs 583.20m. Larsen & Toubro Infotech posted a 17.1% surge in YoY profit at Rs 4.16 billion.

American healthcare giant Abbott is happy over its “better-than-anticipated” performance during the lockdown period due to the rise of revenue through its COVID-19 tests. Other healthcare and personal hygiene sellers also made a kill during the lockdown with a rise in sanitiser and soap sales.

If these sales data will be seen in isolation, then it would look like the economy will revive on its own. But the isolated incidents aren’t showing the real big picture. While RIL saw a 6.8% rise in net profit, the rest of the economy, which depends upon the medium, small and micro enterprises (MSMEs), has been sulking. The fall of these MSMEs is fuelled by the fall in demand and the lack of money in the hands of the poor and zero stimulus to these companies, except the Modi regime’s much-hyped liquidity infusion under the garb of a purported Rs 20 trillion worth “stimulus package”.

In case the rise in profit of the consumer goods companies is analysed, then one will find that these companies were suffering immensely due to the fall in sales in the last few quarters, as rising unemployment, less disposable income and financial uncertainty hovered on the people’s lives.

Britannia traversed through a moderate growth course last year; Parle, India’s famous biscuit maker, suffered the worst due to the economic slowdown and drop in biscuit sales caused since demonetisation.      

Automobiles sales suffered immensely in the last year, causing severe job cuts. The unemployment rate remained at a 45-year-high and consumer demand fell before the pandemic. The rise in unemployment is caused due to lack of demand and it intensified India’s economic crisis, which the Modi regime continued to deny. Rather than acknowledging the crisis, the Modi’s ministers made absurd claims like showing crowd outside theatres to negate the presence of an economic crisis or blame the rise of cab services for low automobile sales.

Even though the consumer goods industry, life insurance and investment sectors, as well as health and wellness sectors, turned the crisis into an “opportunity” to profiteer, capitalising on the fear that drove the country’s middle-class consumers to panic buying, this growth can’t be sustained over a longer period as the unemployment caused by the lockdown and the collapse of different sectors will eventually bring down demand in the long-run after the sudden rise in Q1 and part of the Q2.

The total fall in India’s GDP in the days to come, whose data will not be known soon, will prolong the economic crisis and there will be no sustainable solution within the global capitalist framework. The Modi regime won’t hesitate to utilise the situation to carry out the disinvestment campaigns to privatise all public assets and national resources to benefit the ilk of Ambanis. This will push more people into the realm of unemployment. Rather than a “V-shaped” or “U-shaped” recovery model, the Indian economy is troughing an unusual “A-shaped” course, which will become devastating, and the wealth accumulation by a handful of rich will widen the wealth gap.

Whatever theoretical possibilities Modi’s servile economists or those IMF-supported thinktanks may project about the revival of capitalism, it’s clear that the pandemic didn’t aggravate the crisis rather the latter used the former to mainstream itself without much questions asked about the failures of capitalism. Expecting a revival within this model, within the circumference of capitalism using a bit of Keynesian dosage, will end up in total disappointment. The system is crying for a total change, and except a socialistic model of an economy, nothing can save the day.